Oil continues rally but analysts remain pessimistic

Oil continues rally but analysts remain pessimistic

Oil prices continue to rally after hitting lows in February due to a mild winter. The Financial Post reports that benchmark West Texas Intermediate rose 46 percent since mid-February and finished last week near the $40 per barrel threshold. Analysts, however, remain pessimistic that the recent oil price rally will hold.

The pessimism is not without due cause — after all, a similar scenario happened last year. Last March, oil prices managed to claw their way back up from below $3 per gallon in February before plunging back down the rabbit hole again. WTI itself even reached prices of $60 a barrel by June until prices plummeted anew.

OPEC member Iraq has already called for both OPEC and non-OPEC countries to cooperate for the sake of oil price stability.

“OPEC and non-OPEC countries should act promptly to rebalance world oil supply and demand or the damage could be deeper and take time to recover,” said Falah Alamri, Iraq’s OPEC governor and head of the State Oil Marketing Organization (SOMO).

Although there are tentative agreements in place for OPEC and Russia to freeze crude oil supplies at January levels, many believe that the move may not be enough to restabilize the currently oversupplied oil market.

“The rally is now retreating on fears that OPEC will continue to flood the market with oil in a world where demand may falter,” said Phil Flynn, analyst at the Price Futures Group in Chicago.

Iran, which currently contributes 3 million barrels to the 96.5 million barrels produced per day (about 2 million more than needed), wants to return to the 4 million barrels it produced every day before sanctions targeting its nuclear program were imposed.

Oil Minister Bijan Zanganeh said that Iran will cooperate, but not before they reach their production targets. “They should leave us alone” until then, he said.